Domestic investors consider rival bid for Potash

By Doug Alexander and David Scanlan (China Daily)
Updated: 2010-09-04 07:27
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TORONTO - Chinese investors approached Alberta Investment Management Corp (AIMCo) to consider a joint counter-bid for Potash Corp of Saskatchewan Inc, the Canadian pension fund's chief executive officer said on Friday

AIMCo, as the $66 billion fund is known, wasn't interested in an offer for the Saskatoon, Saskatchewan-based fertilizer maker, Leo de Bever said. Potash Corp is the target of a $40 billion hostile bid from BHP Billiton Ltd, the world's biggest mining company.

"We've been approached, just like other pension plans, by intermediaries trying to broker a deal involving Canadian pension plans and Chinese investors," De Bever said on Thursday. "It never got to the stage of actually dollars and cents and structure."

A counter-bid would indicate China's desire to stop BHP from controlling more supplies to the world's biggest consumer of commodities after years of price tension over iron ore.

Any Chinese offer would have to overcome objections from the Saskatchewan government, which on Thursday said an offer by State-owned enterprises won't be in the interest of the province.

"If this is true, the Chinese investors must be trying to alleviate political concerns by allying with Canadian funds," said Xu Hongzhi, a potash analyst with Beijing Orient Agribusiness Consultant Ltd.

"Investments by the Chinese government is a taboo to other countries whether it is Australia, the United States or Canada as it would bring in political risks."

De Bever declined to name the Chinese investors. Potash Corp, the biggest fertilizer producer, has rebuffed Melbourne-based BHP's $130 a share offer and said it was seeking suitors.

Hopu interest

China is the second-biggest importer of potash, a crop nutrient, after India. Should Potash Corp be acquired by a state-owned company, the new owner may lower prices which won't be in the interest of Saskatchewan taxpayers, the province's Energy and Resources Minister Bill Boyd said.

"A Chinese bidding attempt is not a surprise because their appetite for resources is so strong," said Grant Craighead, co-founder of Sydney-based research company Stock Resource.

"BHP would have had to expect resistance and the Chinese would be an obvious source. There are very few potential bidders in their own right."

Hopu Investment Management Co, a Chinese private-equity fund backed by Singapore-based Temasek Holdings Pte, may also consider a bid.

A Hopu-led group, which could include investors from Canada and Middle Eastern sovereign wealth funds, is studying a potential offer, a person with knowledge of the matter said Aug 23. No decision has been made and the chances of the group making an offer aren't high, the person said.

Guy Cui, managing director of Hopu, couldn't be reached for comments on his mobile phone.

Sinochem talks

Sinochem Group, China's largest fertilizer trader, made initial inquiries with Potash Corp's board last month about the possibility of holding talks, a person with knowledge of the matter said. Sinochem and its Sinofert Holdings Ltd unit are "closely watching" BHP's bid, Sinofert's Chief Executive Officer Feng Zhibin said last week.

"Something's been floating around the pension community for a week or so," De Bever said. "The economics may not make sense."

De Bever said his mandate was to make the best investments for his fund and not to back any push to keep Potash Corp in Canadian hands. The fund "probably" owns Potash Corp, he said.

"I'm not Canada Inc," De Bever said. "I'm supposed to make money for my pensioners and endowment customers."

Bloomberg News

(China Daily 09/04/2010 page10)